McKesson 2011 Annual Report Download - page 103

McKESSON CORPORATION
FINANCIAL NOTES (Continued)
97
II. Other Litigation and Claims
On April 7, 2010, an action was filed in the Superior Court of the State of California for the County of Los
Angeles against, among others, the Company, its indirect subsidiary, NDCHealth Corporation (“NDC”) and “Relay
Health,” a trade name under which NDC conducts business, Rodriguez et al. v. Etreby Computer Company et al.,
(Civ. No. BC435303) (“Rodriguez”). The plaintiffs in Rodriguez purport to represent a class of California residents
whose individual confidential medical information was allegedly illegally released and used by defendants.
Plaintiffs also purport to bring their claims as a private Attorney General action. The claims asserted in the
complaint against the Company defendants include negligence, statutory violations and violation of California
Business and Professions Code, Sections 17200 et seq., covering unfair, unlawful and fraudulent business acts and
practices. The statutory violations alleged by plaintiffs purport to arise out of California Civil Code, Sections 56
through 56.37, also known as the Confidentiality of Medical Information Act (“CMIA”). The complaint seeks
compensatory and statutory damages under the CMIA, equitable and injunctive relief, as well as interest and
attorneys’ fees and costs, all in unspecified amounts. On May 10, 2010, defendants removed the action to United
States District Court for the Central District of California, Rodriguez et al. v. Etreby Computer Company et al.,
(Civil Action No. CV 10-3522-VBF). On June 10, 2010, the Company and NDC moved to dismiss the complaint on
grounds that it fails to allege the required element of knowledge by defendants, fails to allege actual harm to any
plaintiff and improperly names certain defendants, including the Company and RelayHealth. On July 23, 2010, the
court granted defendants’ motion to dismiss on grounds that plaintiffs had failed to sufficiently plead any of their
causes of action and gave plaintiffs until August 9, 2010 to file an amended pleading. On December 9, 2010, the
parties executed a settlement agreement which, in consideration of payment by the Company of a non-material sum,
resolves the claims of all class members who do not affirmatively opt out of the class. On January 12, 2011, the trial
court issued an order granting preliminary approval of the settlement, directing notice to the class and setting a
hearing for final approval of the settlement. The final approval hearing is presently set to occur on June 27, 2011.
On October 3, 2008, the United States filed a complaint in intervention in a pending qui tam action in the
United States District Court for the Northern District of Mississippi, naming as defendants, among others, the
Company and its former indirect subsidiary, McKesson Medical-Surgical MediNet Inc. (“MediNet”), now merged
into and doing business as McKesson Medical-Surgical MediMart Inc., United States ex rel. Jamison v. McKesson
Corporation, et al., (Civil Action No. 2:08-CV-00214-SA). The United States (“USA”) alleges violations of the
federal False Claims Act, 31 U.S.C. Sections 3729-33, in connection with billing and supply services rendered by
MediNet to the long-term care facility operator co-defendants. The action seeks monetary damages in an unstated
amount. On July 7, 2009, defendants filed motions to dismiss the action filed by the relator, arguing that the relator
was not the original source of the claims which he attempts to pursue in his qui tam action. On March 25, 2010, the
trial court granted defendants’ motions to dismiss the relator and his complaint, which ruling has been appealed by
the relator to the United States Court of Appeals for the Fifth Circuit. On June 2, 2010, the USA filed a motion for
partial summary judgment, seeking a finding that the Company’s co-defendant, a Medicare Part B supplier, failed to
comply with certain of the 21 Supplier Standards (“Standards”) established by federal regulations covering such
Medicare suppliers, and that the relevant claims for which MediNet provided contract billing and/or supply services
were rendered “false” by reason of such non-compliance. On July 2, 2010 the Company and MediNet filed their
opposition to the USA’s motion and themselves moved for summary judgment as to certain counts based on
numerous arguments, including that the USA cannot, as a matter of law, establish that the co-defendant Medicare
Part B supplier failed to meet the Standards. On March 28, 2011, the trial court issued its order denying the motion
of the USA and granting the partial summary judgment motions of the Company and its co-defendants on grounds
that, as a matter of law, the Standards had not been violated. All causes of action based on the alleged failure to
comply with the Standards were dismissed. Discovery regarding the balance of the USA’s allegations continues.
Trial is presently set to commence on February 6, 2012.